On Wednesday, chatter on the floor had everything to do about how to trade gold [GCCV1 1825.80 11.10 (+0.61%) ] after Blackrock’s Larry Fink made bullish comments about the miners.
At the Delivering Alpha conference, presented by CNBC and Institutional Investor, Fink essentially said the miners are way undervalued relative to the current price of gold.
Here’s the quote:
“Gold stocks are priced at $800-oz, they haven’t moved. Gold stocks are unchanged and we’ve seen a dramatic rally in gold.”
He went on to say, “You can buy a gold mine right now through private equity and sell forward gold futures and you’ll lock in a massive profit.”
That suggests Fink expects the miners to play a game of catch up.
At the Delivering Alpha conference, presented by CNBC and Institutional Investor, Fink essentially said the miners are way undervalued relative to the current price of gold.
Here’s the quote:
“Gold stocks are priced at $800-oz, they haven’t moved. Gold stocks are unchanged and we’ve seen a dramatic rally in gold.”
He went on to say, “You can buy a gold mine right now through private equity and sell forward gold futures and you’ll lock in a massive profit.”
That suggests Fink expects the miners to play a game of catch up.
However, if you’re a retail investor, strategic investor Dennis Gartman has some very succinct advice. “I would not do this trade ,” he tell us.
”If you want to play gold do it long the GLD [GLD 176.03 1.63 (+0.93%) ] or with the gold futures contracts. That’s the clean bet. That’s the pure bet,” Gartman explains.
Although Gartman appreciates the strategy behind Fink’s trade, he adds “The problem with owning the gold mining companies is that you’re exposed to all kinds of risk. You could come in one morning and find one of your mines had gone under water or collapsed.”
In other words, you may think you’re making an implied bet on gold but you're vulnerable to exogenous catalysts.
”If you want to play gold do it long the GLD [GLD 176.03 1.63 (+0.93%) ] or with the gold futures contracts. That’s the clean bet. That’s the pure bet,” Gartman explains.
Although Gartman appreciates the strategy behind Fink’s trade, he adds “The problem with owning the gold mining companies is that you’re exposed to all kinds of risk. You could come in one morning and find one of your mines had gone under water or collapsed.”
In other words, you may think you’re making an implied bet on gold but you're vulnerable to exogenous catalysts.
Trader Joe Terranova doesn't like the play either. "All year the miners [GDX 64.11 1.31 (+2.09%)] haven't been even close to keeping pace with the gains in physical gold," he says. "Why would they play catch up?"
Now - if you’re saying to yourself I don't care – no risk no reward – then read on. When asked about his favorite names in the space Fink suggested Kinross[KGC 17.43 0.42 (+2.47%)] , Newcrest [NCMGY 39.41 0.65 (+1.68%)] andBarrick Gold [ABX 53.58 0.71 (+1.34%)] .
